Facing the prospect of a turnaround in the hitherto loss-making natural gas business, state-run ONGC is planning aggressive investments for developing its gas fields to ?meet the nation?s energy needs?, the company?s CMD R S Sharma said.
R S Sharma said the price increase from $1.79 to $4.2 per million British thermal unit or mmBtu will give the company relief from the estimated under-recovery (revenue loss) of about Rs 5,400 crore for this financial year.
Sharma said ONGC has never hesitated in making investments to develop its fields in the interest of the nation, but the latest price increase gives the company the necessary relief to do more in the risky business of gas exploration and production.
?From a business perspective, there would be some profits too,? Sharma said. He said the company may be in a better position to give more discounts to state-owned oil retailers IOC, BPCL and HPCL, who buy crude from ONGC. According to him, ONGC?s earning per share, an indicator of profitability, is expected to go up by 10-12% on account of the increased price.
Calls made to the chairman and other senior officials of Oil India Ltd, the other state-owned company selling gas at administered price, remained unanswered.
Fertiliser companies, who would be hit by the higher cost of feedstock, welcomed the spirit of the price increase of gas and expected a similar move in the price of urea, which is now controlled by the government. Producers of urea get government subsidy for selling the fertiliser below cost and would not be affected, although delayed subsidy grant may cause them temporary cash flow problems.
Fertiliser major Iffco?s managing director and CEO U S Avasthi said that $ 4.2 mmBtu is a fair price to both gas producers as well as consumers in the fertilizer industry. ?We (the country) want investments in the gas sector as well as in the fertilizer sector. It is a fair price to both the sectors. We expect the government to take a similar step (increasing sale price) in the case of urea too,? Avasthi said. According to agriculture experts, urea is excessively used by farmers because it is cheaper, leading to severe imbalances in the soil?s constitution.